2002 Annual Report - Turkish Airlines

2002 • 61TURKISH AIRLINES INC.NOTES TO THE FINANCIAL STATEMENTS / continued(Unless otherwise is stated TL amounts are in Million TL, foreign currency amounts appear in full)- The Company has made prepayments of USD 52,505,116 (equivalent of TL 85,819,665), which are related with the capital leased aircrafts of B737-800 and A 340 and are not financed by the creditors. The Company has the purchase option to buy the aircrafts at the end of the financial lease. Ifthe Company takes this option, the ownership of the aircrafts will be given to the Company at the end of 12 years and the advance amounts will beclassified under fixed assets, which will be the cost of the aircrafts. If the Company will not take this option into consideration, the aircrafts will be soldand advances will be paid back to the Company. In this concern, The Company has classified the prepayments under Fixed Assets group, AdvancesGiven section. As the advances given are in foreign currency as of balance sheet date, they are evaluated and foreign exchange gain/loss is charged toprofit and loss figures. The Company has also obtained manufacturers’ credits related with the aircrafts stated above amounting to USD 73,827,305.For the year 2002, extraordinary income recorded related to these manufacturers credits is USD 146,790, which is equivalent of TL 196,170.- The land which Company’s airport and terminal buildings, repair and maintenance centers, training buildings and information technology center wereconstructed, are rented from State Airport Institution (DHMI). The buildings on these lands were made by the Company and recorded as fixed assetsof the Company. The rent contract is automatically renewed each year. Net book value of such buildings areTL 25,542,652 as of December 31, 2002. Furthermore, net book value of a building contracted on a land, which was given to the Company’s usageby Ministry of Finance for 49 years.- Additionally, construction expenditures on various lands, which were rented, from State Airport Institution (DHMI) amounts to TL 5,000 and arefollowed in Construction in Progress account.- Tender for the catering service was won by Uçak Servis A.fi. (USAfi) and service agreement was signed in January 1, 2002. Based on share transferagreement made between USAfi’s main partner Gate Gourmet Holding A.G. (GGH) and the Company, USAfi will transfer its group B free sharescorresponding to 15% of its total capital to the Company. According to the agreement, the ownership of the first 10% shares was transferred in June21, 2002. The transfer of the 15% ownership will be fully completed by transferring 1.25% of the shares in the years 2003-2004-2005 and 2006. 570million shares corresponding to the first 10% share of USAfi’s capital TL which was transferred in June 21, 2002 to the Company, were recorded to“Long-term investment” and “Deferred income” accounts at the market value of TL 9,527,500. “Deferred income” amount will be recorded as incomeduring the 5-year-catering service agreement.- In the January-December 2002 period, exchange rate loss recorded to cost of sales and operational expenses are TL 50,233,712 (31.12.2001:TL87,341,729) and TL 1,470,371 (31.12.2001: TL 1,088,227) respectively and foreign exchange gain recorded in gross sales is TL 32,975,292 (31.12.2001:TL 26,398,737).- In 2001, the company purchased A type handling license of TL 13.648.035 in order to be able to give ground service to third parties. However, as aresult of the meeting of the Privatization High Council held on April 16, 2002, a decision was taken not to give ground service to third parties. OnJanuary 14, 2003 a decision was taken for the revocation of the above A type handling license by the Turkish Republic Ministry of Transport and forthe return to the Company of the amounts paid to DHMI, in USD and for the cancellation of the remaining debt of the Company to DHMI. Thereforethe Company cancelled the expenses of TL 10,544,532 related to the A type handling license that was incurred during the year 2002 and recognizedother extra-ordinary income of TL 7,718,351 which was recognized as expense in 2001.- During the meeting of the Board of Directors held on November 29, 2002, it was decided that the receivable of USD 17,077,439 due from the saleof the Company’s shares of K›br›s Türk Hava Yollar› A.fi. to Turban Turizm A.fi. on December 31, 2000 is to be converted into Turkish Lira and interestshould be accrued. As a result of the correspondence with Turkish Republic Privatization Administration based on the above decision, the abovementioned receivable was converted on December 9, 2002 into TL 26,733,518 from the exchange rate announced by Central Bank of Turkey, andinterest started to be accrued starting from December 9, 2002.